Chinese Robin Hood

It’s an old story.

A agrees to sell something to B. B gets possession of it.

B then sells it to C.

A wants it back, usually because B never paid for it – often because a cheque bounced. (If C has meanwhile sold the car, A might ask C to pay him for it because he has wrongfully dealt with A’s property.)

C says “but I paid for it.”

B is nowhere to be found. Such a character is typically referred to in the case law as a “rogue” – a term of art which strangely I have not found specifically referred to in dictionaries, though it is quite distinct.

A leading case which we all learn in law school is Lewis v Averay. Comically, or nostalgically if you are the right age, the rogue is a man in tights, or passed himself off as one: he managed to get the owner of a car (Lewis) to sell it to him with payment by cheque by convincing him (by means of a forged Pinewood Studios pass) that he was none other than Richard Greene, who had played Robin Hood in the 1950s English TV series. This person then sold the car to Averay. The cheque was forged and worthless and, surprise surprise, “Richard Greene” was nowhere to be found.

The case is taught as one about “mistake” and whether or not that vitiates a contract. That is because the assumption is that if there was a contract, then property in the car passed to the rogue, and when Averay bought the car from the rogue, assuming he didn’t that B was a rogue, it then became his. (That is a simplified version of the assumption, so far as it is embodied in the statutory codification of the law in this regard in the various avatars of the Sale of Goods Acts – eg, in NSW, section 28(2).) If it could be said that Lewis only meant to sell the car to Richard Greene, then maybe there was no contract at all, the car never became the rogue’s, and it never became Averay’s. That was Lewis’s case. He won at first instance, but lost on appeal.

Averay, a bassoonist, subsequently emigrated to Canada, where on last report he lived on a houseboat near Vancouver.

There are a lot of cars in the world and very many rogues. A recent example of such a case can be seen in the judgment of Gibson DCJ in Detective Senior Constable Wilkes v Abou-Yaghi[2012] NSWDC 6.

Mr Abou-Yaghi (A-Y) sold his BMW X5 for $95,000 to a person who said he was a solicitor, a Mr Jeffrey Zhang. There was in fact no such solicitor, so I shall call him Z. Prior to picking up the car, Z said he would pay A-Y with a bank cheque. A-Y told Z he would keep the registration papers until this bank cheque was cleared. A-Y and Z signed a document as follows:

“I Hatem Abou-Yaghi state that I have sold my car, a BMW X5 2009 model, registration number: BLR96B on Wednesday the 6 th of July 2011.

The selling price was $95,000, the payment for the car was by bank cheque.

The registration papers for the BMWX5 will be sent when the bank cheque is cleared from Jeffrey Zhang NSW licence number: 16893252.

This is an agreement between myself, Hatem Abou-Yaghi, and the new owner, Jeffrey Zhang, that the above arrangement is suitable and legally binding.

Signed: Hatem Abou-yaghi [signature] (previous owner)

Signed: [signature] (new owner)[ie, Z]

A-Y provided the log book of the vehicle and two keys together with a BMW key ring. Z signed the registration transfer details, as did A-Y, but A-Y explained that he would keep these documents until the bank cheque cleared. Before Z left A-Y’s house, he took a photograph of the RTA registration paper on his mobile, stating that he may need this if he was stopped by police.

All of this happened a bit after 6 pm – Z rang A-Y at 5.58 pm to say he was coming round to pick up the car and the BMW was on the M2 expressway heading east from Seven Hills by about 6.52 pm.

At 5.52 pm, somebody had already placed an advertisement on the Chinese overseas-students’ web page, Tigtag, advertising the BMW for sale.

103442955 was his “QQ” number. QQ is a popular free instant messaging computer program amongst mainland Chinese.

After that they communicated by QQ, and Jiaqi arranged to meet the person selling the car at the carpark of Kingsford McDonalds (next to UNSW), which he did at about 7.30. The person he met there said he was acting on behalf of the seller and that the car was not there yet. Jiaqi had been told that the sale was a hurried sale because the seller had just graduated and was returning to China. A price of $45,000 was agreed on, and Jiaqi was given the details of the car.

Jiaqi then walked home (he lived nearby) and over the next hour or so did the various checks you can do about a vehicle’s history and whether there are any encumbrances. These were satisfactory.

Jiaqi happened to have $45,000 in cash because he had recently withdrawn $40,000 to buy a car at an auction but had been unsuccessful and he apparently had the other $5,000 available. He returned to McD’s where he was now shown the car. He “fell in love with it.” He did not take it for a test drive or even get into the car before he handed over the $45,000. The registration papers were inside. [Had he looked at the registration papers he would have seen that the purported transferor of the car was A-Y, who would seem unlikely to be a person returning to China after completing his studies.]

Aha! The registration papers! Yes, the registration papers! Presumably with the aid of the picture taken on the mobile phone, forged registration papers had already been produced.

The next morning, Jiaqi went to the RTA (the then name of the relevant NSW authority) to register the transfer. The forgery passed muster. That day, A-Y also lodged the notice of sale and banked the cheque.

A few days later, A-Y was told that the cheque was a forgery: it had been altered from an original figure of $40. He reported the whole thing to the police, which is how come the police finally seized the vehicle and were the applicants in these proceedings, which were in effect a kind of interpleader. Should the car, seized but no longer needed for evidence, be returned to Jiaqi Guo (from whom the police had seized it and to whom they would in the absence of any order, be obliged to return it), or to A-Y or even (I think a theoretical rather than a seriously advanced possibility) kept by the police on behalf of the crown?

Young Mr Guo lost his money. Judge Gibson found against him on two bases that she said were independent. He was not a purchaser in good faith – there were just too many fishy things about the purchase which he had been prepared to overlook. And further, relying on two 1958 NSW cases, the contract between A-Y and Z was “void.”

I’m not so sure about the second ground as an independent ground. It wasn’t so much that the contract was void as that the condition in the contract for the passing of title had not been fulfilled. Of the 1958 cases, one specifically did not deal with section 28 of the Sale of Goods Act (appellate courts were tougher about that sort of thing then) and both predated the reconsideration of what might constitute “possession” which occurred in the Privy Council case of Pacific Motor Auctions Pty Ltd v Motor Credits (Hire Finance) Ltd (1965) 112 CLR 192 in relation to the possession by a buyer who has already sold goods. Judge Gibson indirectly quoted this case via a subsequent High Court case. That case dealt with section 28(1), but a similar meaning of possession is usually thought to apply under section 28(2) to the person who agrees to buy goods and gets possession of them without becoming the owner and then sells them.

But that’s not really what prompted this post. This is an area of the law which is notoriously unsatisfactory. I haven’t the energy to deal with it and nor would I expect Gibson DCJ to be the one to cut or even unravel any Gordian knot.

What I really liked was the facts, the speed with which events unfolded, the abundance of evidence in a digital age (Z’s passage from Seven Hills to Kensington is traceable because he took various toll ways. As you might expect, Z didn’t bother to pay any of the tolls.) and most of all, the appearance of evidence, in Chinese characters, in a judgment of an Australian court. I expect this was itself enabled by the digital source of that evidence and its subsequent provision to the court in digital form.

Of course the biggest fishy thing about the purchase was that Mr Guo paid $45,000 for a car that was presumably worth something approaching $95,000. It was simply too good to be true. That counts for a lot, even if some of the other unusual factors pointed out to the court by the police could be put down to cultural differences.

It’s similar but not quite the same as the “good faith” requirement for s 28 of the sale of goods act, because the law for land is not the same as the law for chattels. In particular, the onus is really reversed here and Mr Zhou, the owner of the house, was the one who had to show that the purchaser took in bad faith and unconscionably. he failed in that but the sale was still set aside.

As The Age‘s story correctly stated, the house was subject to a $480K mortgage and unpaid rates of about $8K. The purchaser at the auction only paid the sheriff $1K but he only got Mr Zhou’s interest. This was worth about $142K after deducting these amounts from $630K (assuming the house to be worth that much). (There’s some rounding here so the amounts don’t exactly stack up.) It’s still a pretty good deal.

Secondly, as The Age says the claim against the purchaser on the “something fishy” basis was not upheld. In that sense, the claim against the purchaser was dismissed.

But this did not mean that the purchaser got to keep the house – it really just will have costs consequences for that part of the trial devoted to that way of putting the claim that did not succeed. The sale itself was set aside, basically because it did not even discharge the sheriff’s costs. It wasn’t a sale to discharge Mr Zhou’s debt to the judgment creditor pursuant to the orders that had been made for the sale of the house at auction without reserve. That is, the “something fishy” affected the validity of the sale, even though the low price did not put the purchaser on notice that there was anything fishy so as to make the purchaser’s conduct unconscionable.